Cross-Border M&A in Vietnam: Legal Due Diligence Essentials

Whether acting for a buyer seeking to avoid hidden liabilities or a seller preparing a clean exit, the Legal Due Diligence (“Legal DD”) is non-negotiable. It helps identify material risks at a target company or group (“Target”) – such as tax, regulatory/licensing, IP, contractual or employment – and shape deal terms. Skipping a thorough professional review can leave investors exposed to issues that may surface and cost years after the transaction.

1.      What Is Legal Due Diligence in Vietnam?

Legal DD in Vietnam is the structured legal review of a Target conducted before signing an M&A transaction. Its purpose is to give buyers – and, where applicable, sellers – clear visibility over a Target’s assets, liabilities, compliance posture, and deal-critical risks, so that pricing, warranties/indemnities, conditions precedent, and the transaction structure can be set on an informed basis.

A standard Vietnam Legal DD typically covers, as relevant to the Target’s business and sector:

• Business structure and licensing (legal form, foreign investment conditions, industry-specific permits)
• Ownership of shares/capital contributions (cap table, transfer histories, ROFR, liens/encumbrances, existing partnerships)
• Contracts (suppliers/clients), lease, loans and indebtedness (change of control, termination, exclusivity, non-compete, intercompany arrangements)
• Employment & labor compliance (contracts and policies, statutory benefits, unions, employees plans)
• Tax & customs (filings, incentives, transfer pricing, withholding tax/VAT exposures)
• Data protection & cybersecurity (compliance, cross-border transfer)
• Disputes & regulatory (litigation, inspections, administrative penalties, compliance)
• Intellectual Property (ownership, registration, licensing)

Deliverables for a Legal DD usually include a red-flag report highlighting issues that can affect valuation or closing, a risk-weighted action list (remedial steps/conditions), and drafting input (warranties, indemnities, covenants, and conditions precedent) in the transaction agreement. Where findings are material, we coordinate with financial and technical advisors to align legal recommendations with the commercial model and timeline.

2.      Why Legal Due Diligence Matters for Buyers

For buyers, the Legal DD is non-negotiable. It is the step after the signature of a letter of intent but before the signature of the transaction agreement and it ensures a transaction proceeds on the safest and most efficient footing.

From selecting the optimal acquisition structure to securing robust protections in the transfer agreement – whether a Share Purchase Agreement or an Asset Transfer Agreement – the Legal DD is a must-have. In particular, it enables buyers to:

• Surface deal-breaking risks. Ensure the absence of any hidden defects in the Target —undisclosed debts, disputes, non-compliance, licensing gaps, lien/encumbrance issues—that can derail closing or erode value.
• Protect value. Use findings to reprice, negotiate warranties/indemnities, set escrows/holdbacks, or craft specific indemnities for identified exposures.
• Choose the right structure. Determine whether an asset deal or share deal (or a hybrid) best mitigates tax, regulatory, and successor-liability risks.
• Mitigate any risk. Translate red flags into conditions precedent, regulatory approvals, and remediation plans with clear ownership and timelines in the
• Set a post-deal transition. Map required consents/assignments, employment transitions, IP/IT and data transfers, and any post-closing restructurings to a practical Day-1/Day-100 plan.

In practice, buyer’s advisers lead the Legal DD, conduct a structured questions and answers (Q&A) with the seller to clarify any ambiguities, and engage with the seller to identify risks and negotiate stronger terms for the buyer.

3.      Why Legal Due Diligence Matters for Sellers

For sellers, the Legal DD (also called Legal Vendor Due Diligence (“Legal VDD”)) is not present in all M&A deals but is common in larger deals or when the seller elects to run a transparent transaction by proactively disclosing issues affecting (or that could affect) the Target.

It strengthens seller’s negotiating position, making the transaction faster, smoother and most of the time, allowing sellers to get better deal conditions. Importantly, a Legal VDD never replaces the buyer’s own Legal DD but rather, it frames and accelerates it. In particular, it enables sellers to:

• Build credibility. Present clean, compliant, up-to-date records to inspire buyer confidence from day one.
• Avoid delays. Identify and fix issues early (consents, licensing, corporate housekeeping, IP, employment) and keep an organized data room to speed Q&A.
• Control the narrative. Disclose known issues on your terms, reducing surprises in buyer Legal DD and limiting renegotiation leverage.
• Strengthen price & terms. Anchor valuation and deal mechanics – representations, warranties, indemnities, caps/baskets, escrows/holdbacks – on a documented risk profile.

4.      Common Legal Issues in Vietnam Legal Due Diligences

Legal DD in Vietnam often surface issues such as:

• Unregistered/late capital contributions. Charter capital not fully paid or not properly registered.
• Missing or outdated licenses. Business lines not reflected in the ERC/IRC, conditional sectors lacking required permits, or expired approvals.
• Undisclosed related-party dealings. Inadequate disclosure or missing transfer-pricing documentation.
• Non-compliant labor contracts. Templates not aligned with local law; gaps in social insurance, trade-union dues, or PIT procedures.
• IP chain-of-title. Trademarks, software, or know-how registered to founders/affiliates rather than the Target; missing assignments.
• Land-use rights & real estate approvals. Incomplete LURCs, lease approvals, construction/fire safety permits, or zoning inconsistencies.
• Tax audits or penalties. Ongoing inspections, arrears, or unresolved administrative sanctions.

5.      Final Thoughts

Legal DD is more than a box-ticking exercise – it’s the safeguard of a successful M&A. For both buyers and sellers, engaging experienced lawyers is essential to verify the Target, surface liabilities, and align the deal with Vietnamese law and regulatory practice. Addressing these issues early informs valuation and structure, streamlines approvals and documentation, and reduces execution risk. Done properly, Legal DD lays the groundwork for a smooth closing and a durable, value-creating investment in Vietnam.

For more information, do not hesitate to contact us.